Virgin Islands Payless Shoe Stores Escape U.S. Mainland Closures

TOPEKA, Kansas — Payless ShoeSource locations in the territory will be spared closures affecting stores on the United States mainland and Puerto Rico.

The discount shoe retail chain has ceased taking orders through its online store, and plans to close all 2,100 United States and Puerto Rico locations.

Various news organizations have reported that liquidation sales began on Sunday, with official closings beginning in March.

There is a Payless ShoeSource outlet in the Sunny Isle Shopping Center on St. Croix and two stores St. Thomas: one in the Tutu Park Mall and one in the Wheatley Shopping Center.

“The challenges facing retailers today are well documented, and unfortunately Payless emerged from its prior reorganization ill-equipped to survive in today’s retail environment,” Stephen Marotta The prior proceedings left the Company with too much remaining debt, too large a store footprint and a yet-to-be realized systems and corporate overhead structure consolidation. As a consequence, despite our substantial efforts, we were ultimately unable to operate the North American retail and e-commerce operations on a sustainable basis.”

Payless intends to use these proceedings to facilitate a wind-down of its approximately 2,500 store locations in North America and its e-commerce operations. The Company expects that Payless store closings will begin at the end of March and many stores will remain open through the end of May, as it conducts liquidation sales in the U.S. and Canada. Payless has also wound down its e-commerce operations.

“We have worked diligently with our suppliers and other partners to best position Payless for the future amidst significant structural, operational, and market challenges,” Marotta, appointed in January 2019 to serve as Chief Restructuring Officer of Payless, said. “Despite these efforts, we now must wind down our North American retail operations under Chapter 11 and the CCAA. However, Payless’ profitable stores throughout Latin America, which are not part of today’s filing, and our international franchisees’ stores will continue to operate business as usual in every respect. As we move through the process, we will work to minimize the impact on our employees, customers, vendors and other stakeholders.”

Payless’ retail operations outside of North America, including its company-owned stores in Latin America, are separate legal entities and are not included in the Chapter 11 or CCAA filings. Payless’ 420 stores across 20 countries in Latin America, its stores in the U.S. Virgin Islands, Guam and Saipan, and its 370 international franchisee stores in 16 countries across the Middle East, India, Indonesia, Indochina, Philippines and Africa, will continue operating business as usual in every respect.

“On behalf of the entire company, I’d like to express our deep appreciation for the hard work of our dedicated employees and their commitment to Payless customers, who have shown us tremendous loyalty for more than 60 years,” Marotta said. “We are also grateful for the many years of support by our suppliers and vendors, and we look forward to continuing to work with them to support our remaining operations.”

The Company will provide a more detailed update on plans for the orderly wind-down of its North American retail operations, including store closing sales, as the Court-supervised process progresses.

Payless is seeking customary initial relief from the U.S. Bankruptcy Court and Canadian Court, including authorization to support its operations during the process, authorization to continue payment of employee wages and maintain healthcare benefits and certain other relief customary in these circumstances. The Company is seeking authorization from the U.S. Bankruptcy Court to continue to honor customer gift cards and store credit until March 11, 2019, and to continue to allow returns and exchanges of applicable non-final sale purchases made prior to February 17, 2019, until March 1, 2019. A similar request will be made in the Canadian Court. Payless has discontinued its Rewards programs and any outstanding merchandise coupons in North America, effective immediately.

Additional information regarding the CCAA filing in Canada will be available on the website of the proposed Monitor, FTI Consulting Canada Inc., once the Monitor has been appointed: http://cfcanada.fticonsulting.com/paylesscanada. The proposed Monitor will establish, once appointed, an information hotline related to enquiries regarding the CCAA process at +1 855-718-5255.

Akin Gump Strauss Hauer & Feld LLP and Armstrong Teasdale LLP are serving as the Company’s legal counsel and Cassels Brock & Blackwell LLP is serving as Payless Canada’s counsel. Ankura Consulting Group is serving as the Company’s restructuring advisor. PJ SOLOMON is serving as financial advisor to the Company. A&G Realty Partners is serving as real estate consultant to the Company.

The Author

John McCarthy

John McCarthy has been reporting on the U.S. Virgin Islands and the Caribbean region since 1989. John's articles have appeared in the BVI Beacon, St. Croix Avis, San Juan Star and Virgin Islands Daily News. He is originally from Detroit, Michigan.